The business band must get back together
In the past few weeks I travelled to the UK and the US and then held discussions with businesses in the city of Cape Town to test some of the learnings from my overseas trip. I did all of this in an effort to get a different perspective about SA as a country, its people, investment potential and prospects.
I learnt during the political transition between 1990 and 1994 the importance of looking at SA’s problems through a wider, global lens, to avoid being buried by the weight of the problems at hand.
Moreover, I understand that the orientation of business and the ways in which it interacts or competes is a central part of a country’s development trajectory. Large firms are important for realising economies of scale, making large and lumpy investments, and research and development, particularly when the bureaucracy is embedded and has the ability to offer carrots and use sticks where necessary.
However, in the absence of competition to discipline the monopoly power of such firms, they earn rents without improving efficiencies and investing in developing dynamic capabilities.
Before I left on my trip I read finance minister Tito Mboweni’s economic policy paper, “Economic Transformation, Inclusive Growth and Competitiveness: Towards an Economic Strategy for SA”, an initiative the tripartite alliance had criticised, alleging a lack of consultation. The document became a framing platform for the discussions I had with some of the foreigners who have an interest in, and investment appetite for, SA.
Some of them had invested in SA from the 1960s and made a lot of money up until the past 10 years or so. They now perceive SA to be too inward looking, and favouring the East over its traditional trading partners.
But a bigger criticism was saved for the governing party’s antagonism towards SA business. In our discussions the investors mentioned the critical role business played in SA’s political transformation and the economic reforms that preceded the release of Nelson Mandela and other political prisoners, the unbanning of liberation movements and the role of the Consultative Business Movement in the peace process and economic compromise that led to the adoption of the Growth, Employment and Redistribution (Gear) policy.
The people I interacted with made the point that as the economic growth potential of SA is now at a low ebb of about 1%, the country requires closer co-operation among all economic players. They asked what the government is doing to kick-start higher growth, and were convinced that in a time of economic crisis business needs to work together through a think-tank to reach a unified position informed by evidencebased research of what it will take for SA to get out of its economic crisis.
They observed that organised labour is too close to the government and the ANC, and it is in the interests of business to bring them closer as allies, since both will gain through investment by firms that leads to growth in profits and employment. In the absence of an institutionalised think-tank, business will find itself bargaining in every sector without coherence, to the detriment of the economy.
In the political transitions of the 1990s big companies such as Anglo American, Sanlam and Old Mutual were pivotal in providing researched alternatives and human resources to help reach a political settlement. Is it not time for innovative institutions in the services sectors, such as financial services, information technology and telecommunications, to emulate their industrial counterparts by playing a much bigger role in economic policy, rather than deferring to the ANC and the tripartite alliance?
The reality is the latter simply have no clue about the depth of the crisis and the need for urgent economic reforms.